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Evergrande is facing potentially one of China’s largest-ever restructurings as a crackdown on debt leaves the company unable to refinance $305 in liabilities. The company said it requested a trading halt as it waits for an announcement about a major transaction. The Evergrande Property Services Group said the announcement will constitute "a possible general offer for shares of the company."

According to China’s Global Times, Hopson Development is the buyer of the 51% stake in the property unit. Hopson had also said it was suspending trading in its shares, awaiting an announcement related to a major acquisition of a Hong Kong-listed company. Although it is yet to be confirmed whether Hopson’s statement was related to the Evergrande Group, the company has a larger potential to assist Evergrande than other property developer, owning more assets than liabilities. 

The potential deal between Evergrande and Hopson has appeared to respark wider concerns regarding the risk of contagion or a hit to China’s property sector and the broader economy if Evergrande does collapse or is liquidated at very low prices. According to Reuters, Government-owned companies have been encouraged to purchase some of Evergrande’s assets.  

Evergrande, which currently stands $305 in debt, has been struggling to raise funds as Wednesday’s deadline for a $47.5 million bond interest payment approaches. The property giant also owes payments to banks and suppliers. 

Evergrande has said that it has entered into an agreement to sell the 1.75 billion shares it owns in Shengjing Bank to state-owned firm Shenyang Shengjing Finance Investment Group. 

In a statement, the property developer said that its liquidity issues have already “adversely affected” Shengjing Bank “in a material way.” Evegrande says it hopes that introducing Shenyang Shengjing Finance Investment Group will stabilise the bank’s operations. 

Evergrande has also said it is making an ongoing effort to sell stakes in other assets to ease its liquidity problems. It has already sold property units to suppliers and contractors to begin offsetting some of its debts. According to the company’s latest financial statement, its outstanding payments amounted to approximately $3.8 billion as of August 27. 

On Wednesday morning, Evergrande’s shares in Hong Kong were up almost 10% in early trading. 

On Friday, ten powerful Chinese government bodies, including the central bank, announced that overseas exchanges were banned from providing services to mainland investors online. This had previously been a grey area. 

Binance and Huobi Global, two of the globe’s largest crypto exchanges that are especially popular with Chinese customers, have stopped new registrations of accounts by users in the country. Huobi has also promised to clean up existing Chinese customers by the end of 2021. Speaking to Reuters, Huobi co-founder Du Jun said: "On the very day we saw the notice, we started to take corrective measures.” 

On Monday, shares in crypto-related firms fell with investment holdings company Huobi Technology plunging 23% and fintech company OKG Technology dropping 12%.

In an announcement to clients, TokenPocket, a popular service provider of crypto wallets, said it would be terminating services to mainland Chinese customers to avoid violating Chinese policies. The provider said it would actively embrace the new regulations and said it welcomes cooperation from China in blockchain tech. 

In 2017, many Chinese crypto exchanges closed down or relocated offshore as China banned such platforms from converting legal tender into cryptocurrencies and vice versa. In May of this year, China’s state council announced plans to ban bitcoin trading and mining altogether, despite China once being the largest bitcoin trading and mining centre in the world. 

Evergrande owes $305 billion but has run short of cash, leaving investors deeply concerned. A collapse of the company could pose systemic risks to China’s financial system and could reverberate around the globe. 

The deadline for paying off the $83.5 million in bond interest went by without any remark from Evergrande. Bondholders were not paid and apparently heard nothing from the company. Evergrande has now entered into a 30-day grace period. It will default if this period passes without payment. 

Howe Chung Wan, head of Asia fixed income at Principal Global Investors in Singapore, said: "These are periods of eerie silence as no one wants to take massive risks at this stage. There's no precedent to this at the size of Evergrande [...] we have to see in the next ten days or so, before China goes into holiday, how this is going to play out."

On Friday, China’s central bank once again injected cash into the banking system. However, authorities in the country have kept quiet on Evergrande’s situation, with no mention of any sort of potential rescue package.  

Last week, Evergrande appointed financial advisers and warned of default. On Monday, global markets fell dramatically amid fears of contagion, though they have stabilised since. 

Chinese policymakers now face the dilemma of how fiercely they can impose financial discipline whilst also avoiding social unrest. The collapse of Evergrande could devastate the property market which accounts for 40% of household wealth in the country. Even by last week, there were protests by disgruntled suppliers, home buyers, and investors, demonstrating how discontent could quickly and easily spiral if a default triggers crises at other developer companies. 

Shares in China’s second-largest property developer Evergrande have plunged by almost 17% as investors weigh up whether the company’s huge debt problems could trigger a broader sell-off across other financial markets. 

In Hong Kong on Monday, Evergrande fell to its lowest market value ever, trawling the Hang Seng index down to its lowest point in almost a year. Other large property stocks in Hong Kong, such as Henderson Land and New World Development, also saw double-figure falls in their prices on Monday amid widespread anticipation that Evergrande will default on some of its debt repayments this week. The property developer currently owes $300 billion. 

There are concerns that such a move by Evergrande could have a dramatic knock-on effect throughout the Chinese economy and even beyond. 

This contagion factor was most perceptible in Australia as the benchmark ASX200 index closed down 2.1% on Monday as investors abandoned mining stocks such as Rio and BHP. The price of iron ore — Australia’s main export — also fell by 60% from its high point back in May due to a slowdown in the Chinese property and construction industries. If Evergrande were to collapse, such issues within the sectors would only accelerate. 

Last month, China said it planned to strengthen the supervision of all companies listed offshore. This regulatory shift followed a cybersecurity investigation into ride-hailing giant DiDi just days after its US IPO in July.

Under China’s proposed rules, scrutiny of overseas IPO-found companies would be tightened by the Chinese securities regulator. The rules would also ban those that collect vast amounts of user’s data or create content that could potentially pose a security threat. 

If they aim to list their shares outside of China, then internet firms would be asked to apply for review with the Cybersecurity Administration of China (CAC) of their own accord. The CAC would conduct the review alongside other relevant ministries and regulators if need be. After the CAC’s approval, companies would be allowed to apply to the securities regulator. 

China’s plan comes amid several other proposals currently under consideration by regulators as the country tightens its grip on its internet platforms.

Online consumers in China cut back on spending in all areas in July, from large items such as cars to smaller items such as cosmetics. Retail sales increased by 8.5% from a year ago, coming in lower than the predicted 11.5%. However, auto-related sales, the biggest component of retail sales by value, was the only category to see a decline in July, down 1.8% year-on-year. 

One of the slowest-growing categories was the cosmetics sector, with sales rising by just 2.8% in July from last year, compared with a growth in June of 13.5%. According to CNBC, online sales of physical consumer goods increased by just 4.4% in July.

The head of macro and strategy research at China Renaissance, Bruce Pang, has pinned the sharp decline in online sales on widespread shopping promotions offered in June, in addition to the logistics disruptions caused by pandemic-related travel restrictions and the severe weather events suffered in July.

Online financial services giant PayPal has increased the amount of cryptocurrency users can purchase by five times, and is scrapping its annual purchase limit of $50,000. PayPal’s vice president has said that the changes will allow users to have greater choice and flexibility when purchasing cryptocurrency on PayPal’s platforms. 

The financial services giant first began allowing users to purchase cryptocurrencies in October 2020, later adding the option to buy bitcoin via its mobile payment app, Venmo. There is a $1 dollar spending requirement on the product, which allows users to share crypto purchases via Venmo’s social feed. 

When the move by PayPal was first announced, it was considered a substantial step in bringing digital assets to mainstream buyers. However, since April, bitcoin has lost around half of its value when it reached an all-time high of around $60,000. Despite El Salvador becoming the first country to adopt bitcoin as a legal tender back in June, cryptocurrencies have recently faced substantial criticism and opposition, particularly from the Chinese government

The country’s second-quarter GDP increased by 1.3% in the first quarter, quicker than the 0.6% growth seen between the first quarter of this year and the fourth quarter of 2020. However, this most recent quarterly increase has still proven to be slower than the 2.6% increase seen in the fourth quarter. In the first quarter, China’s GDP rose by 18.3%

Despite China’s second-quarter GDP growth coming in lower than expected, the country’s June retail sales and industrial production grew faster than predictions. From a year ago to June, retail sales increased by 12.1%, exceeding the 11% forecast by Reuters. The country’s quickest-growing category was beverages, which was up 29.1% year-on-year. However, retail sales growth has fallen behind that of the overall economy, failing to reach analyst’s predictions for the first two months of the second quarter.

In May, consumption was down year-on-year in Wuhan, Yinchuan, Guiyang, and Shijiazhuang, according to research by Pinpoint Asset Management. The urban survey unemployment rate maintained a level of 5% in June. However, younger people were hit harder, with unemployment for 16 to 24 year-olds climbing back to 15.4%, the same figure seen in June 2020.

Most people are now confused about this rollercoaster relationship between China and cryptocurrency. Is mining cryptocurrencies illegal in China? Is Bitcoin banned in China? Let's take a look at some of the issues that can help us put this matter into perspective.

Is Cryptocurrency Illegal In China?

Recently, China gave prohibitory orders to financial institutions that were partnering companies, making it impossible for cryptocurrencies to continue operations in the country. As a matter of fact, trading platforms and exchanges have ceased operations in China. However, this is not the first time that the Chinese government has made such a move. In 2017, the ban was initiated when the ICO boom happened. In the last few weeks, the crackdown on crypto operations has intensified, and this intensification can be considered a reinstatement of the ban. Here is a summary of what has transpired in China in 2021:

There have been challenges with crypto mining in China and this has had some impact on the industry. You can read more on the different measures that different countries are taking in attempts to regulate the crypto markets.

BTC Mining In China

Most mining operations in China take place in Inner Mongolia, Yunnan, Xinjiang, and Sichuan. These are regions that have both renewable and non-renewable sources. With the government imposing bans and restrictions on mining Bitcoin in these regions, there are serious repercussions to crypto miners and investors. While it is not clear if BTC is banned in China, the ban on mining has created fear, uncertainty, and doubt in the global markets. This has been one of the contributing factors to the drastic decline in Bitcoin prices.

The Chinese government has not restricted owning and holding Bitcoin but has banned mining processes. One of the key concerns for prohibiting crypto mining in China is the fact that the industry is volatile and this can have adverse effects on the economy. In addition, China has been making every effort to become the leader in green energy. Bitcoin mining uses a lot of energy and this seems to be counterproductive. However, the government supports blockchain technology as it has intentions of introducing a central bank digital currency.

China has banned crypto mining, which seems to have impacted the market in a significant manner. On a positive note, miners will relocate to other parts of the work and this could neutralise China’s dominance in the crypto industry. Most experts are optimistic that, in the near future, this ban will be a blessing as Bitcoin's value will improve.

Two days after announcing a cybersecurity review of DiDi, China’s Cyberspace Administration ordered Chinese app stores to remove DiDi from the platforms entirely, claiming the company has severely violated regulations surrounding personal data. Regulators also requested that DiDi rectify all existing problems in line with national standards to protect personal data of DiDi’s many users.

On Friday, DiDi said it would fully cooperate with the government’s review. Aside from the suspension of new DiDi users, the company has insisted there will be no service interruptions for those already using the app. DiDi is not the only company to face tough crackdowns by Chinese regulators. Tencent, Alibaba, and are amongst others who have also been targeted. Action by the regulators aims to curb risk and prevent unfair labour practices.

The regulatory scrutiny surrounding DiDi follows its Wall Street debut, where the company raised $4.4 billion from investors in one of the biggest IPOs in recent memory. DiDi’s first day on the New York Stock Exchange drew to a close with a market capitalisation of approximately $75 billion, making the company’s president a new billionaire.

On Tuesday, bitcoin plunged to around $28,890, losing 50% of its value since its all-time $63,729.5 high in April. The drop comes as China told banks and payment platforms to stop supporting digital currency transactions. On Friday, bitcoin mining in the Sichuan province was brought to a halt by government orders. Last month, the State Council pledged to clamp down on the mining and trading of cryptocurrencies as part of its campaign to control financial risks. On Monday, China’s central bank said it had newly called for several major banks and payment companies to take tougher action against the trading of digital currencies. Banks in China were ordered to stop providing products and services, including trading, clearing, and settlement, for cryptocurrency transactions.

According to research by the University of Cambridge, China accounted for approximately 65% of global Bitcoin production in 2020. The Sichuan province was the country’s second largest producer of digital currency.

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